German industrial conglomerate Siemens AG (SI) said Wednesday that it has agreed to buy Invensys Rail, the rail automation business of Britain's Invensys plc (ISYS.L, IVNYY), for about €2.2 billion, or £1.742 billion, to expand its presence in the growing global rail automation market.
Invensys Rail is a software based rail signaling and control company. It generated revenues of £775 million in its last financial year ending March 2012, and currently has around 3,200 employees.
The deal, which is subject to Invensys shareholder approval and regulatory clearances, is expected to close in the second quarter of calendar year 2013. Invensys shareholder are expected to vote on the deal at a general meeting planned next month.
Wayne Edmunds, Chief Executive of Invensys, said, "Following a strategic review which highlighted the likely consolidation in the global rail signalling market and the limited scope to increase the size of the Invensys Rail business, we have decided to refocus the Group around our industrial software, systems and control equipment business and, accordingly, to dispose of Invensys Rail."
Invensys said it plans to return £625 million, or around 76.7 pence per share, to its shareholders, subject to completion of the deal.
The London-based company also said it has reached an agreement with the Pension Trustee to make a contribution of £400 million into the UK Pension Plan and put £225 million into the Reservoir Trust.
Invensys Rail has a strong footprint in the UK, Spain, the U.S. and Australia which will extend Siemens' Rail Automation existing presence in countries such as Germany, Austria, Switzerland as well as China and India.
Siemens already has an established rail automation business with revenues of €1.4 billion, employing around 6,500 people. Invensys Rail shall be integrated into that business, which is headquartered in Berlin, Germany.
Additionally, Siemens said it plans to divest its baggage handling, postal and parcel sorting activities to further focus the activities of the Siemens Infrastructure & Cities Sector. For the fiscal year 2012, the business generated revenue of about EUR900 million, and had around 3,600 employees as of September 30.
"Today's moves are important measures to focus our core activities. We are exiting a non-core business with limited synergy potential while strengthening a resilient and high return business by combining two organizations with similar cultures and attractive synergy potential. The combined business will ensure profitable growth opportunities worldwide for the Siemens Infrastructure & Cities Sector," said Roland Busch, CEO of Siemens Infrastructure & Cities.
Siemens shares closed Wednesday 0.65% higher at €78.94 in Frankfurt, while Invensys shares jumped 27.10% to close at 280.00 pence.
by RTTNews Staff Writer
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